Call Them AT1s or CoCos, Here’s Why They Can Blow Up: QuickTake

They’re called contingent convertible bonds, or CoCos — and are often described as high-yield investments with a hand grenade attached. An emergency rescue of Credit Suisse by UBS Group AG in March included pulling the pin on $17 billion of CoCos, also known as Additional Tier 1 (AT1) bonds. A legacy of the global financial crisis, they’re the lowest rung of bank debt, producing juicy returns in good times but taking a hit when a bank runs into trouble. While shareholders — often the first domino to fall in such situations — salvaged some value from the takeover engineered by ...